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8;30pm   Wednesday   17 November  2010   Philippine Stock Exchange Index   3018.67 (+1.71%)

It is really no wonder that the market is up today.  Encouragement always come from Wall Street, although there are quite a bit of fundamentals that are helping us out.  For one, there is a lot of cash in local investors hands that cannot find a decent yield.  A lot of wealthy people are getting restless looking for places where they can squeeze some yields.  The government deficit which is considered the current drag on the domestic financial markets is not really that bad specially if you framework it in the backdrop of Portugal, Ireland, Greece, and Spain.  All these countries have budget deficits way above the European Monetary Union (EMU) agreement of 3% of GDP.  These four countries have deficits at double digits while the Philippines is only 3.4% of GDP.  We are more qualified to be in the EMU than these four countries which now carry the acronym PIGS.

If you ask my investment advise, I would recommend the domestic market over the PIGS at this point in time.  Most of you probably realize that credit spreads for Philippine sovereign bonds hardly moved after Greece’s credit crisis.  Something like that never happened in my life in the financial markets.  The world truly has changed.

I quite like the way our market behaved today with fundamentally strong stocks leading the way.  Except for BEL which had total crosses amounting to around 300 million pesos, the most active list was dominated by the like os TEL, GLO, FPH, AC, MBT, EDC, MBT, ALI, SM, AGI, URC and MPI.  All these stocks have good underlying earnings.  Some may be expensive valuations wise, but they have solid fundamentals behind them.  While we face potential profit taking because we have had six days of price increases, the short-term trend still looks good and I base my opinion on the price ranges of stocks like TEl and MBT.  I think TEL will rise to above 2600 probably to 2660 and MBT will likely go to at least 47.  AC could return to 300 while MPI could go up to 2.90 and MEG to 1.40.

Small cap stocks like TUNA and PIP looked poised to do return to their stronger price levels before the end of 2009 and some smaller cap stocks look to be in play.  I am not encouraging speculation on small caps with no fundamental earnings, but stocks like CYBR looks like it is being accumulated by their core investors.  I think that at this point, a lot of people are willing to play the game and will continue to fuel buying.  I would caution, however, about being to bullish because we still have the uncertainty of elections three months down the road.  To sum it up, I would suggest that if you want to make some money, you can trade the blue chips until they approach the highs of their recent trading ranges.  I think there will be a second chance to get them back within the next two months should you choose to take profits.

The vulnerability of our market will be from external market sentiment and our national elections.  I think these factors are what we should make our stock plays on.  Incidentally, we have been seeing steady foreign buying over the last two weeks.

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